The Financial Conduct Authority (FCA) has published new proposals on advice relating to pension transfers where consumers have safeguarded benefits – primarily for transfers from defined benefit to defined contribution pension schemes.
Following introduction of the pension freedoms in April 2015 and the resulting increase in options for consumers to access their pension savings, the proposals aim to reflect the current environment and increased demand for pension transfer advice, the FCA says.
The level of transfer values is at an 'historic high' according to the FCA, because of the increased options and, it says, recent changes to the financial environment.
Christopher Woolard, executive director of strategy and competition at the FCA, said its new approach should better equip advisers to give the right advice to help consumers make informed decisions.
He said: "DB pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them.
"However, we recognise that the environment has changed significantly and we want to ensure that financial advice considers the customer's circumstances in full and recognises the various options now available to them."
The new rules outline the FCA's expectations of advisers and pension transfer specialists to ensure that consumers receive advice which considers all relevant factors.
They build on an FCA alert on advising on pension transfers published in January.
The proposed changes include requiring transfer advice to be provided as a personal recommendation, and replacing the current transfer value analysis with a comparison to show the value of the benefits being given up.
James Walsh, Policy Lead: EU & International, Pensions and Lifetime Savings Association (PLSA), said the proposals go a long way towards ensuring savers understand potential losses they could incur by leaving DB schemes.
"Nearly all defined benefit or hybrid schemes have received a transfer request in the last six months and we know that transferring out of a defined benefit scheme may not be in the members' interests," he said.
"Defined benefit pensions provide scheme members with a guaranteed income for life – irrespective of how long their retirement might be, so it is essential this guarantee is not given up without serious consideration and appropriate financial advice is taken before any decisions are made."
First published 23.06.2017
Lindsay.sharman@wilmingtonplc.com
